Common misconceptions about life insurance explained
Most Canadians recognize life insurance as a way to protect their loved ones’ future. But the latest data reveals a shift in perspective: life insurance is actually a form of financial self-care you can benefit from today.
The 2025 Blue Cross Life Insurance Study found that two-thirds (66%) of Canadians have faced increased financial stress and anxiety over the last year. At a time when daily expenses keep climbing,the study highlights a powerful link between protection and peace of mind.
Having a life insurance policy doesn’t just protect your family later; it also helps you feel more in control right now. So why the hesitation? Let’s debunk some common life insurance myths that hold Canadians back from securing their future.
Myth 1: I’m young and healthy, so I don’t need life insurance
Youth and health are actually your greatest assets when it comes to life insurance. While you might feel like you have plenty of time, 89% of Gen Z respondents from our study report experiencing stress due to financial challenges—a higher rate than any other generation surveyed. Younger Canadians are also more likely to worry about burdening their loved ones financially. Securing a policy early can help quiet those concerns.
The Canadians we surveyed identified several key advantages togetting life insurance in your 20s:
- Lower costs: Rates are typically at their lowest when you’re young. Locking in when health is on your side can save you a significant amount over the life of the policy.
- Immediate security: Have peace of mind knowing you have protection in place, even if life throws you a curveball.
- Proactive planning: It’s smart to get coverage before life evolves and your financial responsibilities increase, as is typically the case with major milestones like starting a family or buying a home.
Myth 2: I don’t need life insurance because I’m single
While having a spouse or children is a common reason to buy life insurance, it isn’t the only one. Even without traditional dependents, most of us leave behind a financial footprint that won't simply disappear when we pass.
If you have a mortgage or other outstanding debt, a term life insurance policy prevents those balances from becoming a burden for your parents or siblings. The payout provides a dedicated fund for final expenses so loved ones aren't paying out of pocket during a difficult time. It also ensures continued support for those who may count on your income later in life, like aging family members.
Your needs may look different from those of a parent of three, but your coverage is meant to evolve. You can start with what protects your current lifestyle today and adjust as your responsibilities grow.
Myth 3: Life insurance is too expensive
Cost is one of the most cited reasons for delaying coverage, but the price tag is often misunderstood. Over a third of Canadians overestimate the cost of life insurance by as much as 300%.
In reality, term life insurance is designed to be budget-friendly. For many healthy adults, monthly premiums can cost less than a single takeout meal. And because rates are tied to your age and health, locking in a policy early ensures you benefit from these lower costs for years to come.
To keep coverage accessible, providers like Blue Cross Life use digital underwriting. By streamlining the application process and reducing operational costs, this technology allows for more competitive rates without compromising the quality of your protection.
Myth 4: My work policy gives me enough coverage
Workplace life insurance is a valuable perk and an excellent starting point for many Canadians. But relying on it exclusively can create a false sense of security.
Employer-sponsored group policies often come with some limitations:
- Limited coverage: Coverage amounts are typically limited to 1-2 times your annual salary. For most Canadians, this isn’t enough to cover a mortgage, outstanding debts, and long-term living expenses.
- Limited flexibility: Group policies are designed for a broad group of people, meaning they aren’t tailored to your individual circumstances or specific needs.
- Limited portability: In most cases, coverage ends the moment you change jobs, get laid off, or retire, leaving you unprotected during periods of significant transition.
Our data shows that Canadians are becoming increasingly aware of these gaps. More than half (56%) of those with workplace life insurance benefits specifically fear losing their protection if their employment situation changes. Securing an individual policy ensures your protection stays with you, not your job.
Myth 5: Only primary earners need life insurance
Stay-at-home parents or a non-income-earning partners may wonder: "Do you really need life insurance?" While it’s often discussed as a form of income replacement, life insurance is actually a broader financial safety net designed to protect the total economic value you bring to your household.
Non-income-earning parents provide essential services that would be incredibly expensive to replace. A surviving partner would be left to cover the costs of full-time childcare, transportation, and other responsibilities associated with household management and upkeep. They might be forced to reduce their working hours or pay for additional support, creating a double-edged financial burden.
Even dual-income families can face significant challenges in the face of an unexpected loss. 50%
Canadians say their household would not be able to maintain its current lifestyle for a year if the primary earner passed away. A life insurance payout provides the funds to bridge the gaps, allowing your family’s daily life to continue without overwhelming strain.
Myth 6: Life insurance payouts are taxed
In Canada, term life insurance payouts are 100% tax-free as long as they are paid directly to your named beneficiary. For instance, if you have $250,000 in life insurance coverage, your loved ones would receive the full $250,000 if you pass away. This money can be used to cover anything from living expenses and debts to funeral costs.
If you don’t name a beneficiary for your term life policy, your death benefit is paid out to your estate. Since your estate would be subject to estate taxes first, this can reduce the amount of money that is ultimately passed to your loved ones. By ensuring your policy details are up to date, you can ensure your beneficiary gets the full payout without any legal holdups.
Myth 7: It’s impossible to get coverage with health issues
There’s a common misconception that having pre-existing medical conditions mean sky-high life insurance rates or no coverage at all. But affordable term life insurance is well within reach for most Canadians, even if you have a medical history.
Certain health issues may impact premiums and add a couple extra steps along the way, but you can still qualify for comprehensive coverage that fits within your budget.
Myth 8: Once you buy a policy, you’re stuck with it forever
Life insurance should evolve with every stage of your life. You can—and should—change up your coverage if your situation changes.
Longer-term policies, up to 30 years, can help you lock in an affordable rate. But most term life insurance policies are designed with customizable coverage that aligns with your needs. It’s easy to add or ladder coverage as your life evolves. And with providers like Blue Cross Life, there are no penalties to cancel a policy if your needs change.
How life insurance can support your long-term financial goals
9 out of 10 Canadians (89%) with life insurance say it boosts their mental health by reducing anxiety over final expenses and outstanding debt. By purchasing a life insurance policy when you’re younger and healthier, you can secure a more affordable rate and provide protection down the road.
Life insurance puts you in the financial driver’s seat. It can help you feel more in control of your future, so you don’t have to worry about life throwing you a curveball.
Tips for choosing the right life insurance policy
Now that we’ve sorted out the life insurance myths and facts, here are some tips to help you get started:
- Experts recommend 7-10 times your annual salary as a starting point for a coverage amount.
- When calculating your coverage, consider your financial obligations, number of dependents, future expenses, and current savings.
- You can pair an individual term life insurance policy with your existing workplace group coverage for more comprehensive protection.
- Get a free, no-obligation term life insurance quote in minutes. Getting covered can be quicker and more affordable than you think.
Remember, your life insurance coverage can be personalized to suit your needs. If you have questions and want to speak to someone about your specific scenario, connect with one of our licensed insurance advisors. They’re available to provide helpful support, without any pressure to buy a policy.
